Gujarat BoardEnglish MediumSTD 12 CommerceOCMMARKETING MANAGEMENT3 Marks
Question
Explain in brief four components of promotion mix.
✓
Answer
Introduction :
Price is important for both seller and buyer in the market.
Consumers expect lowest price, on the other hand profit of the business unit depends on the price of the product.
Price of the product and demand has inverse relation.
Product will not be demanded if its price is high.
But due to very low price, the profit of business decreases.
Considering various factors marketing management should determine reasonable price of the product.
Meaning of Price :
Price is related to the value paid by the consumer for physical, economic, social and psychological satisfaction received from the product or service.
Factors affecting pricing : factors influencing price are as under :
Cost of the product :
Price cannot determined without considering its cost of production.
Cost of product includes cost of raw - material, production cost, administrative expense, expensed sale and distribution, etc.
Various expenses are incurred when new product is introduced in the market.
This expense is recovered from selling price of the product.
Demand of the product :
Demand is directly connected with price of the product.
When the demand of the product is little higher then higher price can be fixed.
If the demand is low then price too should be fixed quite low.
If the competitors in the market are many or the demand of the products of competitors is high then the price of the product should be equal to that of other competitor’s products.
If the number of competitors is less, then price can be fixed high and more profit can be earned.
Price of the product is affected by the taste of the consumers, numbers of consumers, their purchasing power, number of competitors etc.
Competition in the market :
Producer fixes competitive price if there is knee competition in the market.
Price is determined in the market on the basis of strategies to face the competitors, to defeat them or to make entry in the market difficult.
If the prestige in the market is good, then firm can fix the price of its product higher than that of its competitors and take higher price from consumers.
Governmental and legal control :
Monopoly business unit may exploit consumer by fixing price quite high.
Considering this aspect in public interest government controls such firm through legal control.
Regulations are considered while fixing price of the product.
Government has imposed legal regulatory control for price fixation for life saving drugs, petrol, diesel, paper for daily newspaper etc.
Objective based price determination :
Maximum profit :
When business unit is in monopoly business it recovers all expenses such as research expense and fixes price of the product.
Its aim is to earn maximum profit as it has spent huge amount for research.
To acquire dominance in the market :
Sometimes price is kept quite, low to capture large market share and to become leader in the market.
To sustain competition :
Due to large number of competitors and keen competition, business units willingly fix the price at par or at times lower to exit in competition.
Economic condition :
Current economic condition of the country plays vital role in price determination of the product,
If the economic condition of a country is good, high price is fixed.
If economic progress is slow, and recession prevails then low price of the product is observed.
Buying behaviour :
Buying behaviour of the consumer means consumers habits, and role played by social, cultural and individual and economic factors.
Due to all these factors it is likely that consumers attitude towards the product change and proper response is not received from the consumer.
So it is necessary to consider consumers buying behavior before fixing price of the product.
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